ASSET PURCHASE AGREEMENT
by and among
CURTISS-WRIGHT FLIGHT SYSTEMS, INC.,
CURTISS-WRIGHT CORPORATION,
VISTA CONTROLS, INC.,
LDS ACQUISITION CORP.,
LAU ACQUISITION CORPORATION
and
LAU DEFENSE SYSTEMS LLC
dated October 24, 2001
<page>
Exhibits
Exhibit A Assumption Agreement
Exhibit B Financial Statements
Exhibit C Purchase Price Allocation
Exhibit D Transition Services Agreement
Exhibit E Sample Earnout Calculation
Schedules
Schedule 1.18 Employees
Schedule 2.2(m) Leasehold Interests
Schedule 2.3(g) Excluded Inventory
Schedule 1.44 Sellers' Knowledge
Schedule 2.7 Earnout
Schedule 3.2 Breaches
Schedule 3.5 Government Approvals
Schedule 3.7 Condition of Assets
Schedule 3.8 Taxes
Schedule 3.9 Compensation
Schedule 3.10 Employee Benefit Plans
Schedule 3.11 Compliance with Legal Requirements
Schedule 3.12 Legal Proceedings; Orders
Schedule 3.13 Absence of Certain Changes and Events
Schedule 3.14 Intellectual Property Assets
Schedule 3.15 Contracts
Schedule 3.16 Labor Relations; Compliance
Schedule 3.17 Insurance
Schedule 3.22 Gross Profit Margins
Schedule 4.3 Government Approvals
<page>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS...................................................1
Section 1.1 "Accounts Receivable"..............................1
Section 1.2 "Acquisition Agreements"...........................1
Section 1.3 "Actual Gross Profit"..............................1
Section 1.4 "Affiliate"........................................1
Section 1.5 "Arbiter"..........................................1
Section 1.6 "Assumed Liabilities"..............................1
Section 1.7 "Assumption Agreement:.............................2
Section 1.8 "Balance Sheet"....................................2
Section 1.9 "Business".........................................2
Section 1.10 "Buyer"............................................2
Section 1.11 "Cash Purchase Price"..............................2
Section 1.12 "Closing" and Closing Date"........................2
Section 1.13 "Closing Date Net Book Value"......................2
Section 1.14 "Closing Financial Statements".....................2
Section 1.15 "Code".............................................2
Section 1.16 "Contracts"........................................2
Section 1.17 "Earnout", "Earnout Payment", "Earnout Period"
and "Earnout Year"................................2
Section 1.18 "Employees"........................................3
Section 1.19 "Escrow Agent".....................................3
Section 1.20 "Escrow Funds".....................................3
Section 1.21 "Excluded Assets"..................................3
Section 1.22 "Files and Records"................................3
Section 1.23 "Final Adjustments Report".........................3
Section 1.24 "Financial Statements".............................3
Section 1.25 "GAAP".............................................3
Section 1.26 "Governmental Body"................................3
Section 1.27 "HSR Act"..........................................3
Section 1.28 "Inventories"......................................3
Section 1.29 "LDS Assets".......................................3
Section 1.30 "LDS Business".....................................3
Section 1.31 "Lau"..............................................4
Section 1.32 "Leases"...........................................4
Section 1.33 "Legal Requirement"................................4
Section 1.34 "Material Adverse Effect"..........................4
Section 1.35 "Person"...........................................4
Section 1.36 "Pre-Closing Bonus"................................4
Section 1.37 "Prepaid Expenses".................................4
Section 1.38 "Proceeding".......................................4
Section 1.39 "Purchased Assets".................................4
<page>
Section 1.40 "Reference Net Book Value".........................4
Section 1.41 "Representative"...................................4
Section 1.42 "Resource Allocations".............................4
Section 1.43 "Sellers"..........................................4
Section 1.44 "Sellers' Knowledge"...............................4
Section 1.45 "Stock"............................................5
Section 1.46 "Tangible Personal Property".......................5
Section 1.47 "Tax" or "Taxes"...................................5
Section 1.48 "Transition Services Agreement"....................5
Section 1.49 "Unit".............................................5
ARTICLE II. PURCHASE AND SALE............................................5
Section 2.1 Closing............................................5
Section 2.2 Purchase and Sale..................................5
Section 2.3 Excluded Assets....................................7
Section 2.4 Purchase Price; Payment; Assumed Liabilities;
Allocation.........................................8
Section 2.5 Cash Purchase Price Adjustment....................10
Section 2.6 Final Adjustments.................................10
Section 2.7 Earnout Payment...................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS..................15
Section 3.1 Organization...................................15
Section 3.2 Authorization; Enforceability..................15
Section 3.3 Capitalization.................................16
Section 3.4 Financial Statements...........................16
Section 3.5 Government Approvals...........................16
Section 3.6 Fixed Assets; Properties; Liens................17
Section 3.7 Condition of Assets............................17
Section 3.8 Taxes..........................................17
Section 3.9 Compensation...................................17
Section 3.10 Employee Benefit Plans.........................17
Section 3.11 Compliance With Legal Requirements.............18
Section 3.12 Legal Proceedings; Orders......................18
Section 3.13 Absence of Certain Changes and Events..........18
Section 3.14 Intellectual Property Assets...................18
Section 3.15 Contracts......................................18
Section 3.16 Labor Relations; Compliance....................19
Section 3.17 Insurance......................................19
Section 3.18 Real Property..................................19
Section 3.19 Brokerage......................................19
Section 3.20 Accounts Receivable............................19
Section 3.21 Inventory......................................19
Section 3.22 Gross Profit Margins...........................19
<page>
Section 3.23 Rights to TASS and Qupid Programs..............19
Section 3.24 Price Adjustment...............................19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER.....................20
Section 4.1 Organization...................................20
Section 4.2 Authorization; Enforceability..................20
Section 4.3 Government Approvals...........................20
Section 4.4 Brokerage......................................21
Section 4.5 Investment.....................................21
ARTICLE V. COVENANTS OF SELLERS.........................................21
Section 5.1 Access and Investigation.......................21
Section 5.2 Conduct of Business............................21
Section 5.3 Required Approvals.............................21
Section 5.4 No Negotiation.................................21
Section 5.5 Additional Information.........................21
Section 5.6 Reasonable Efforts.............................22
Section 5.7 Non-Solicitation; Non-Interference.............22
ARTICLE VI. COVENANTS OF BUYER..........................................22
Section 6.1 Required Approvals.............................22
Section 6.2 Employees and Employee Benefits................22
Section 6.3 Reasonable Efforts.............................23
ARTICLE VII. CONDITIONS TO BUYER'S OBLIGATIONS..........................24
Section 7.1 Accuracy of Representations and Warranties.....24
Section 7.2 Sellers' Performance...........................24
Section 7.3 Officer's Certificate..........................24
Section 7.4 Governmental Consents..........................24
Section 7.5 HSR............................................24
Section 7.6 No Injunctions.................................24
Section 7.7 Consents.......................................24
Section 7.8 Conveyances....................................25
Section 7.9 Lease Agreement................................25
Section 7.10 Employment Agreements..........................25
Section 7.11 Adequate Customer Assurances...................25
Section 7.12 Schedules and Exhibits.........................25
Section 7.13 Transition Services Agreement..................25
<page>
ARTICLE VIII. CONDITIONS TO SELLERS' OBLIGATIONS........................25
Section 8.1 Accuracy of Representations and Warranties.....25
Section 8.2 Buyer's Performance............................25
Section 8.3 Officer's Certificate..........................25
Section 8.4 Governmental Consents..........................25
Section 8.5 HSR............................................26
Section 8.6 No Injunctions.................................26
Section 8.7 Purchase Price.................................26
Section 8.8 Assumption Agreement...........................26
Section 8.9 Lease Agreements...............................26
Section 8.10 Employment Agreements..........................26
Section 8.11 Schedules and Exhibits.........................26
Section 8.12 Transition Services Agreement..................26
ARTICLE IX. POST-CLOSING COVENANTS......................................26
Section 9.1 Further Assurances.............................26
Section 9.2 Retention of Records...........................27
Section 9.3 Litigation Support.............................27
Section 9.4 Payment of Liabilities.........................27
Section 9.5 No Section 338 Election........................27
ARTICLE X. NONCOMPETITION...............................................27
Section 10.1 Noncompetition.................................27
Section 10.2 Breach.........................................27
Section 10.3 Severability...................................28
ARTICLE XI. TERMINATION AND ABANDONMENT.................................28
Section 11.1 Termination....................................28
Section 11.2 No Waiver......................................28
ARTICLE XII. INDEMNIFICATION............................................28
Section 12.1 Indemnity by Sellers and Lau...................28
Section 12.2 Indemnity by Buyer.............................29
Section 12.3 Threshold and Ceiling..........................30
Section 12.4 Tax Benefits and Insurance Coverage............30
Section 12.5 Exclusive Remedy...............................30
<page>
ARTICLE XIII. MISCELLANEOUS.............................................31
Section 13.1 Expenses.......................................31
Section 13.2 Public Announcements...........................31
Section 13.3 Confidentiality................................31
Section 13.4 Notices........................................31
Section 13.5 Survival.......................................32
Section 13.6 Entire Agreement...............................32
Section 13.7 Waiver and Amendment...........................32
Section 13.8 No Third Party Beneficiary.....................33
Section 13.9 Severability...................................33
Section 13.10 Headings and Interpretation....................33
Section 13.11 Governing Law..................................33
Section 13.12 Dispute Resolution.............................33
Section 13.13 Assignment.....................................34
Section 13.14 Taxes..........................................34
Section 13.15 Bulk Transfer Laws.............................34
Section 13.16 Attorneys Fees.................................34
Section 13.17 Counterparts...................................34
<page>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of the
24th day of October, 2001, by and among Curtiss-Wright Flight Systems, Inc., a
Delaware corporation ("CW Flight"), Curtiss-Wright Corporation, a Delaware
corporation ("CW Corporation") (CW Flight and CW Corporation referred to
collectively as "Buyer"), Lau Defense Systems LLC, a Massachusetts limited
liability corporation ("LDS"), LDS Acquisition Corp., a Massachusetts
corporation ("LDS Acquisition"), Lau Acquisition Corporation ("Lau"), a
Massachusetts Corporation and Vista Controls Inc., a California corporation
("Vista") (LDS, LDS Acquisition and Vista are collectively referred to as
"Sellers").
W I T N E S S E T H:
WHEREAS, Buyer desires to acquire all of Sellers' right, title and
interest in and to the assets, business and properties used in connection with
the Business of Sellers, and Sellers desire to transfer to Buyer all of such
assets, business and properties.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
The following terms, when used in this Agreement, shall have the meanings
indicated below:
Section 1 "Accounts Receivable" shall have the meaning ascribed to such
term in Section 2.2 hereof.
Section 1.2 "Acquisition Agreements" shall mean this Agreement, the
Assumption Agreement, the Transition Services Agreement, and any other
agreements or instruments which are executed in connection with this Agreement
in order to effectuate the transfer of any of the Purchased Assets or the
assumption of any of the Assumed Liabilities, collectively.
Section 1.3 "Actual Gross Profit" shall have the meaning ascribed to
such term in Section 2.7.
Section 1.4 "Affiliate" of any Person means any other Person
controlling, controlled by or under common control with such first Person, where
control means the possession, directly or indirectly, of the power to vote 50%
or more of the voting securities or other equity interest of a Person.
Section 1.5 "Arbiter" shall have the meaning ascribed such term in
Section 2.6.
Section 1.6 "Assumed Liabilities" shall have the meaning ascribed to
such term in Section 2.4 hereof.
<page>
Section 1.7 "Assumption Agreement" shall mean the Assumption Agreement
to be entered into between Buyer and Sellers with respect to the assumption of
the Assumed Liabilities in substantially the form of Exhibit A hereto.
Section 1.8 "Balance Sheet" shall mean the unaudited pro forma
consolidated balance sheet of the Business as of June 30, 2001, in the form
provided to Buyer by LDS and as adjusted for the terms of this Agreement,
annexed hereto as part of the Financial Statements in Exhibit B hereto.
Section 1.9 "Business" shall mean the products and/or services that
Sellers offer for sale or lease or have under research and/or development as of
the Closing Date of the transaction contemplated by this Agreement including,
without limitation, defense electronics and anti-personnel sensors (including
the TASS and Qupid programs), as well as Sellers' right to and in all operations
and facilities used in the development and/or production of such products and/or
services. The Business does not include any products, services, intellectual
property, trade secrets or other assets of Lau or any of its Affiliates other
than the Sellers or any other Excluded Assets, including, but not limited to,
facial recognition technology.
Section 1.10......"Buyer" shall mean Curtiss-Wright Flight Systems, Inc.
and Curtiss-Wright Corporation.
Section 1.11......"Cash Purchase Price" shall have the meaning ascribed
to such term in Section 2.4 hereof.
Section 1.12......"Closing" and "Closing Date" shall have the meanings
ascribed to such terms in Section 2.1 hereof.
Section 1.13......"Closing Date Net Book Value" shall mean the number
obtained by subtracting (a) the sum of the liabilities of the Business existing
on the Closing Date and reflected on the pro forma Closing Date balance sheet
(excluding the corporate credit line from Lau), which constitute Assumed
Liabilities, from (b) the sum of the tangible assets (other than cash) of the
Business existing on the Closing Date and reflected on the Closing Date balance
sheet, which constitute Purchased Assets. The Closing Date Net Book Value shall
be calculated in accordance with the principles set forth in Section 2.6.
Section 1.14......"Closing Financial Statements" shall have the meaning
ascribed to such term in Section 2.6 hereof.
Section 1.15......"Code" shall mean the Internal Revenue Code of 1986,
as amended.
Section 1.16......"Contracts" shall mean all written leases (including
the Leases), agreements, contracts, licenses, purchase orders and other legally
binding commitments of Sellers, including, without limitation, subcontracts from
Lau under so-called Section 8(a) programs and the GM Cope joint venture.
Section 1.17......"Earnout", "Earnout Payment", "Earnout Period" and
"Earnout Year" shall have the meanings ascribed to such terms in Section 2.7
hereof.
<page>
Section 1.18......"Employees" shall mean those Persons listed on
Schedule 1.18.
Section 1.19......"Escrow Agent" shall have the meaning ascribed to such
term in Section 2.4(b) hereof.
Section 1.20......"Escrow Funds" shall have the meaning ascribed to such
term in Section 2.4 (b) hereof.
Section 1.21......"Excluded Assets" shall have the meaning ascribed to
such term in Section 2.3 hereof.
Section 1.22......"Files and Records" shall have the meaning ascribed to
such term in Section 2.2(a)(vii) hereof.
Section 1.23......"Final Adjustments Report" shall have the meaning
ascribed to such term in Section 2.6 hereof.
Section 1.24......"Financial Statements" shall have the meaning ascribed
to such term in Section 3.4 hereof.
Section 1.25......"GAAP" shall mean generally accepted U.S. accounting
principles as applied on a basis consistent with the accounting policies and
procedures used by Sellers in preparing the June 30, 2001 financial statements.
Section 1.26......"Governmental Body" shall mean any federal, state,
local, foreign or other governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing, arbitration
panel, commission or similar dispute resolving panel or body.
Section 1.27......"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
Section 1.28......"Inventories" shall have the meaning ascribed to such
term in Section 2.2(a)(iv) hereof.
Section 1.29......"LDS Assets" shall have the meaning ascribed to such
term in Section 2.2(a).
Section 1.30......"LDS Business" shall mean the products and/or services
that LDS offers for sale or lease or have under research and/or development as
of the Closing Date of the transaction contemplated by this Agreement including,
without limitation, defense electronics and anti-personnel sensors (including
the TASS and Qupid programs), as well as LDS' rights to and in all operations
and facilities used in the development and/or production of such products and/or
services. The Business does not include any products, services, intellectual
property, trade secrets or other assets or rights of Lau or any of its
Affiliates other than LDS or any other Excluded Assets, including, but not
limited to, facial recognition technology.
<page>
Section 1.31......"Lau" shall mean Lau Acquisition Corp. d/b/a Lau
Technologies.
Section 1.32...... "Leases" shall mean, collectively, the leasehold
interests in the real property listed on Schedule 2.2(m).
Section 1.33......"Legal Requirement" shall mean any federal, state,
local, foreign or other administrative order, constitution, law, ordinance,
regulation or statute.
Section 1.34......"Material Adverse Effect" shall mean a material
adverse effect on the condition, results of operations, properties, or assets of
the Business.
Section 1.35......"Person" shall mean any individual, corporation
(including any nonprofit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
Section 1.36......"Pre-Closing Bonus" shall have the meaning ascribed to
such term in Section 2.4 (d) hereof.
Section 1.37......"Prepaid Expenses" shall have the meaning ascribed to
such term in Section 2.2(a)(i) hereof.
Section 1.38......"Proceeding" shall mean any action, arbitration,
investigation, litigation, or suit (including any civil, criminal,
administrative, investigative, or appellate proceeding) commenced, brought,
conducted, or heard by or before any Governmental Body.
Section 1.39......"Purchased Assets" shall have the meaning ascribed to
such term in Section 2.2(c) hereof.
Section 1.40......"Reference Net Book Value" shall mean the number
obtained by subtracting (a) the sum of the liabilities of the Business reported
on June 30, 2001 as set forth in the Balance Sheet (excluding the corporate
credit line with Lau), which constitute Assumed Liabilities from (b) the sum of
the tangible assets (other than cash) of the Business reported on June 30, 2001
as set forth in the Balance Sheet, which constitute Purchased Assets.
Section 1.41......"Representative" shall mean with respect to a
particular Person, any director, officer, employee, agent, consultant, advisor,
or other representative of such Person, including legal counsel, accountants,
and financial advisors.
Section 1.42......"Resource Allocations" shall have the meaning ascribed
to such term in Section 2.7.
Section 1.43......"Sellers" shall mean Lau Defense Systems, LLC, LDS
Acquisition Corp., and Vista Controls, Inc.
Section 1.44......"Sellers' Knowledge" shall mean the actual knowledge,
as of October 24, 2001, of the employees of the Sellers or Lau who are listed on
Schedule 1.44.
Section 1.45......"Stock" shall have the meaning assigned to such term
in Section 2.2(b).
<page>
Section 1.46......"Tangible Personal Property" shall have the meaning
ascribed to such term in Section 2.2(a)(iii) hereof.
Section 1.47......"Tax" or "Taxes" shall mean all material income, gross
receipts, sales, stock transfer, excise, bulk transfer, use, employment,
franchise, profits, or property taxes, fees, stamp taxes and duties,
assessments, levies or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority with respect thereto.
Section 1.48......"Transition Services Agreement" shall mean the
Transition Services Agreement to be entered into between Lau and/or Sellers and
Buyer in substantially the form attached as Exhibit D hereto.
Section 1.49......"Unit" shall have the meaning ascribed to such term in
Section 2.7 hereof.
ARTICLE II.
PURCHASE AND SALE
Section 2.1 Closing. The purchase and sale (the "Closing") provided for
in this Agreement shall take place at 10:00 a.m. (Eastern Standard Time), on
____________, 2001 at the offices of Hill & Barlow, a Professional Corporation,
or at such other time, date, or place, as Buyer and Sellers may agree. The date
on which the Closing shall take place is referred to as the "Closing Date." The
Closing shall be deemed to be effective as of 12:01 a.m. (Eastern Standard Time)
on the Closing Date.
Section 2.2 Purchase and Sale.
(a) At the Closing, Sellers will sell, convey, transfer, assign and
deliver to CW Flight, and CW Flight will purchase from Sellers all of
Sellers' right, title and interest in and to the assets of the LDS
Business (collectively, the "LDS Assets") including, without limitation:
(i) All Sellers prepaid assets and prepaid expenses existing on
the accounting records of Sellers relating to the LDS Business as of
the Closing Date (the "Prepaid Expenses");
(ii) All accounts receivable of the LDS Business created in the
ordinary course of business of Sellers and of the nature of those
accounts receivable set forth on the Balance Sheet as of the Closing
Date (collectively, the "Accounts Receivable");
(iii) All items of tangible personal property owned by Sellers
used in the ordinary course of business of the LDS Business and on
hand as of the Closing Date including, without limitation, tooling,
machinery, equipment, furniture and fixtures and office equipment
(collectively, the "Tangible Personal Property"); all assignable
warranties and licenses issued to Sellers in connection with the
Tangible Personal Property; and any assignable claims, credits and
rights of recovery with respect to the Tangible Personal Property;
<page>
(iv) The inventories of finished goods, raw materials, work in
progress, repair stock, parts and supplies maintained by Sellers for
the LDS Business which are on hand as of the Closing Date, but not
including the inventory described on Schedule 2.3(g) (the
"Inventories"); all assignable warranties and licenses issued to
Sellers in connection with the Inventories; and any assignable
claims, credits and rights of recovery with respect to the
Inventories;
(v) All Contracts of Sellers relating to the LDS Business,
including those listed on Schedule 3.15 hereto;
(vi) All of the intellectual property rights owned by the
Sellers used for the LDS Business, including assignable licenses to
any third party intellectual property used in the LDS Business and
copyright in any documentation, product specifications, and software
(source and machine code) for products and services that are part of
the LDS Business;
(vii) All papers and records in Sellers' care, custody or
control which relate to any or all of the Purchased Assets and to
the operations of the LDS Business, whether in hard copy, magnetic
tape or other format including, without limitation, customer and
prospective customer files, vendor and prospective vendor files,
maintenance records, warranty and customer support obligation
records, sales and advertising material, documentation,
specifications, technical manuals, outstanding proposals and
accounting and financial records, provided that Sellers will not be
required to violate any confidentiality provisions of third parties
relating to third party confidential information (collectively,
"Files and Records");
(viii) All of Sellers' assignable rights to memberships in trade
organization and all of Sellers' certificates, licenses, permits,
authorizations and approvals issued by any governmental authority,
agency or other instrumentality in connection with the LDS Business;
(ix) All rights and assets relating to the TASS and Qupid
programs;
(x) The right to use the corporate name "Lau Defense Systems"
for a period of five (5) years dating from the Closing and the right
to use the corporate name "LDS Acquisition Corp." from and after the
Closing as corporate names and solely in connection with the
Business and provided that Buyers will take reasonable measures to
avoid confusion with Lau's use of the "Lau" name, trademark and
service-mark;
(xi) The right to sub-lease the leasehold interests in the
office spaces at 24 Porter Road and 30 Porter Road in Littleton, MA,
to the extent of the space depicted on Schedule 2.2 (m), on terms
similar to those currently provided to LDS; and
<page>
(xii) All rights that Sellers and Lau have in the information
technology system(s) used to perform Sellers' information technology
requirements in connection with the Business, including but not
limited to the hardware and software used in connection with the
Power Growth information technology system, provided that Lau and
Sellers shall be entitled to a reasonable transition period during
which to obtain their own replacement information technology
system(s).
(b) At the Closing, LDS and LDS Acquisition Corp. will sell, convey,
transfer, assign and deliver to CW Corporation, and CW Corporation will
purchase from LDS and LDS Acquisition all of the issued and outstanding
capital stock of LDS Acquisition and Vista, and the related stock
ledgers and corporate record books and all rights in the name "Vista
Controls" (collectively, the "Stock").
(c) At the Closing and subsequent to the Closing, CW Flight will
assume all of the obligations and liabilities associated with the LDS
Assets to the extent set forth in this Agreement and CW Corporation will
assume all of the obligations and liabilities associated with the Stock
(Stock and LDS Assets referred to collectively as "Purchased Assets"),
including all obligations associated with and requirements to perform
under the Contracts.
Section 2.3 Excluded Assets. Notwithstanding Section 2.2 above, there
shall be excluded from the Purchased Assets the following (collectively, the
"Excluded Assets"):
(a) Cash;
(b) Any products, services, intellectual property, trade secrets, or
other assets of Lau or any of its Affiliates other than the Sellers;
(c) Any use of the "Lau" trademark other than in connection with
"Lau Defense Systems" as provided in Section 2.2(a)(x);
(d) Any asset or property that would otherwise be included in the
Purchased Assets but the assignment or attempted assignment of which
would be invalid or would constitute a breach of contract, including the
Contracts; provided, however, that any asset or property referred to in
this clause shall be held and/or received by Sellers or its Affiliates
for the use and at the direction and for the benefit of Buyer or its
designee(s);
(e) The LDS limited liability operating agreement dated as of
October 1, 1999, as amended, the LDS certificate of formation, and other
documents relating to the organization, maintenance, and existence of
LDS as a limited liability company;
(f) The redemption agreements between LDS and certain of its
members;
<page>
(g) All assets set forth on Schedule 2.3 (g), except that Sellers
agree to maintain such assets in storage in a bonded warehouse during
the Earnout Period (as such is defined in Section 2.7 of this Agreement)
to be made available exclusively to Buyer for purchase during the
Earnout Period. Seller agrees to sell to Buyer all assets set forth on
Schedule 2.3 (g) at the greater of the then current market price for
such assets or Seller's original cost, such cost documented as agreed to
by Buyer and Sellers, provided that if such assets are no longer
available in the market, then Buyer agrees that Sellers shall make the
market and establish a reasonable market price, upon receipt of purchase
orders from Buyer, and Buyer agrees not to purchase assets of the nature
set forth on Schedule 2.3(g) from any other source during the Earnout
Period unless Sellers' stock of such assets is fully depleted before the
end of the Earnout Period; and
(h) The obligations of LDS under the Stock Purchase Agreement among
LDS, LDS Acquisition, Vista and the former shareholders of Vista dated
as of September 30, 1999 (the "SPA"), it being understood that LDS is
not assigning such Agreement to the Buyer.
Section 2.4 Purchase Price; Payment; Assumed Liabilities; Allocation.
(a) In consideration for the purchase of the Purchased Assets, Buyer
will pay, or will cause its Affiliates to pay, the Cash Purchase Price
as set forth in Section 2.4(b) hereof, which shall be subject to
adjustment as set forth in Section 2.5 hereof, and Buyer will assume, or
will cause its designee(s) to assume, at the Closing, the Assumed
Liabilities specified in Section 2.4(c) hereof.
(b) At the closing, Buyer will deliver to Sellers, or will cause its
designee(s) to deliver to Sellers, on behalf of itself: (i) the sum of
thirty six million nine hundred thousand dollars in U.S. currency (US$
36,900,000) (the "Cash Purchase Price"), such amount to be delivered by
wire transfer to accounts specified by Sellers; and (ii) the sum of four
million one hundred thousand dollars in U.S. currency ($4,100,000), such
amount to be delivered by wire transfer to an interest-bearing account
established at Commerce Bank and Trust in Worcester, Massachusetts
("Escrow Agent") and to be held by such Escrow Agent as security against
the post-closing obligations of Sellers (the "Escrow Funds") under the
terms and conditions of the Escrow Agent's standard escrow agreement
until eighteen months from the Closing Date, at which time the remaining
Escrow Funds shall be wired to an account specified by the Sellers. The
Cash Purchase Price shall be adjusted pursuant to Section 2.5 hereof,
and the amount of any reduction in the Cash Purchase Price shall be paid
to Buyer out of the Escrow Funds at the time of such adjustment. In the
event that the Cash Purchase Price is increased by the adjustment
provided for in Section 2.5, the additional funds shall be wired to the
account specified by the Seller at the time of such adjustment. The
interest earned by such Escrow Funds will inure to the benefit of the
party or parties receiving the Escrow Funds pursuant to this Agreement.
If the Parties both receive sums from the Escrow Funds, each party will
receive a share of the interest in the percentage their share is of the
total Escrow Funds.
(c) Effective as of the Closing Date (as defined below), and in
addition to any other liabilities expressly assumed by Buyer under this
Agreement, Buyer shall assume responsibility for the performance and
satisfaction of the following (the "Assumed Liabilities"):
<page>
(1) All liabilities and obligations of the Sellers which are
listed on the Balance Sheet other than the Sellers' obligations
under their corporate credit line with Lau;
(2) All liabilities and obligations of the Sellers which have
arisen or accrue after the date of the Balance Sheet in the ordinary
course of business and which are of a type that would in accordance
with GAAP be reflected on the balance sheet in the quarter in which
they arise;
(3) All obligations of the Sellers under the agreements,
contracts, leases, licenses, and other arrangements included in the
Purchased Assets;
(4) By virtue of Buyer's purchase of Stock, and notwithstanding
Section 2.3(h) above, Buyer shall assume all of the liabilities and
obligations of LDS Acquisition to the former shareholders of Vista
relating to the earnout for the year ending September 30, 2002, as
more particularly described in Section 1.2.3 of the SPA;
(5) All obligations and liabilities related to the ownership,
use, possession or condition of the Purchased Assets arising on or
after the Closing Date including the compliance requirements under
the Contracts and any related government compliance or audit
requirements;
(6) Liability for Taxes relating to the Purchased Assets with
respect to any period or part thereof commencing immediately after
the Closing Date; and
(7) Liability for any product liability including, without
limitation, by operation of applicable law, in connection with
products shipped by Buyer or otherwise relating to the Purchased
Assets on or after the Closing Date.
The assumption by Buyer of all liabilities relating to the
Agreements and the underlying Purchased Assets, including all Assumed
Liabilities, shall be effective upon the Closing Date unless the terms
hereof expressly state that such liabilities shall transfer at another
time.
(d) Unless otherwise provided in the Agreements, Buyer will not
assume or agree to pay, perform or discharge any liability or obligation
of Sellers or their Affiliates other than the Assumed Liabilities. In
particular but not to the exclusion of other liabilities, Buyer will not
assume or agree to pay, perform or discharge any liability of the
Sellers or their Affiliates relating to or arising out of any
environmental conditions or for employee bonuses, if any, due to
employees of the Business for the periods prior to the Closing Date
("Pre-Closing Bonus"). Sellers agree to pay any outstanding amounts due
to any employees for any Pre-Closing Bonuses prior to the Closing Date.
<page>
(e) The Cash Purchase Price (and other capitalization costs) shall
be allocated as specified in Exhibit E hereto for all purposes
(including financial accounting and tax purposes). None of Buyer,
Sellers or their respective Affiliates, shall file any tax return or
take any position, tax or otherwise, or make any filing inconsistent
with the allocations set forth in Exhibit E.
Section 2.5 Cash Purchase Price Adjustment. In accordance with the
procedures set forth in Section 2.6, the Cash Purchase Price shall be either:
(a) decreased to the extent that the Reference Net Book Value is
greater than the Closing Date Net Book Value; or
(b) increased to the extent the Reference Net Book Value is less
than the Closing Date Net Book Value.
Section 2.6 Final Adjustments. Final adjustments to the Cash Purchase
Price will be determined as follows:
(a) Buyer will prepare, in good faith and in accordance with GAAP a
consolidated pro forma balance sheet of the Business as of the Closing
Date (the "Closing Financial Statements"), together with a report (the
"Final Adjustments Report"), based on the Closing Financial Statements,
setting forth in reasonable detail Buyer's calculation of the Closing
Date Net Book Value. Buyer shall deliver the Closing Financial
Statements and Final Adjustments Report to Sellers within 90 days after
the Closing Date. In preparing the Closing Financial Statements, Buyer
will use the following practices. The closing date balance sheet
("Closing Date Balance Sheet") will be prepared in a proper and
consistent basis in accordance with the standards, principles and
practices utilized in the Balance Sheet. No change in accounting
principles used in preparing the Balance Sheet will be made in preparing
the closing date balance sheet of the Sellers. The Sellers' consolidated
closing date balance sheet account will be prepared on a basis that is
consistent with the Balance Sheet including, but not limited to, the
following:
(i) For purpose of valuing Inventory and long-term contract
balances: Inventory will be valued on a consistent basis between the
Closing Date Balance Sheet and the Balance Sheet. Consistency would
include the margins utilized in the calculation of the Inventory
included in the PIR sheets as of June 30, 2001, which shall not
change for the Closing Balance Sheet calculation based upon any
judgmental changes regarding profitability of a job (i.e. margin
change) with no activity since June 30, 2001; for any contracts that
are materially closed out between June 30, 2001 and the Closing
Balance Sheet, changes will be made only to comply with GAAP and
Percentage-of-Completion accounting rules; the Inventory at Closing
will include the actual overhead rate rather than the applied 150%
overhead rate calculated by the system; all contract margins,
including Estimate-at-Completion (EAC) margins, shall be calculated
using the actual overhead rate rather than the applied 150% rate;
and all stock/inventory with no value (i.e. capitalized labor and
overhead on closed jobs) will be valued at zero in the Closing Date
Balance Sheet.
<page>
(ii) For purposes of calculating depreciation and amortization:
the bases and rates of depreciation and amortization used in the
Balance Sheet will be consistently applied at the Closing Date
Balance Sheet. No changes to the depreciation and amortization rates
as well as the accumulated balances, including retroactive changes,
will be allowed in the interim period between the two balance
sheets.
(iii) For the purposes of calculating provisions and accruals:
the Closing Balance Sheet shall only reflect decreases in provisions
and accruals since the Balance Sheet that result from utilization of
the provision or accrual (i.e. payment of services, use over time,
etc.) and adjustments to the actual rates incurred up to the Closing
Date, both according to GAAP rules. Any Changes in judgment between
the two period will not be reflective in the Closing Date Balance
Sheet.
(b) Within 30 days after receipt of the Closing Financial Statements
and the Final Adjustments Report, Sellers shall notify Buyer of its
objections to the Final Adjustments Report, if any. Any amount which is
not in dispute shall, within five business days after the expiration of
the review period, be paid by wire transfer in immediately available
funds. Any payment to be made by Sellers shall be first paid from the
Escrow Funds.
(c) The parties shall in good faith attempt to resolve any dispute
with respect to the Final Adjustments Report and/or the Closing
Financial Statements, such resolution of the dispute to be conclusive
and binding upon the parties. If the parties do not reach agreement
resolving the dispute within 15 days after notice is given by Sellers to
Buyer pursuant to clause (b) above, the parties shall submit the dispute
to a nationally recognized independent accounting firm mutually
agreeable to the parties, which firm shall not have had a material
relationship with either Buyer or Sellers or their respective Affiliates
within the two years preceding the appointment (the "Arbiter"), for
resolution. If the parties cannot agree on the selection of the
independent accounting firm to act as Arbiter, the parties shall request
the American Arbitration Association to appoint such a firm, and such
appointment shall be conclusive and binding upon the parties. Promptly,
but no later than 20 days after its acceptance of its appointment as
Arbiter, the Arbiter shall determine, based solely on presentations by
Buyer and Sellers, and not by independent review, only those issues in
dispute and shall render a report as to the dispute and the resulting
change in computations in the Final Adjustments Report and/or the
Closing Financial Statements, if any, which shall be conclusive and
binding upon the parties. In resolving any disputed item, the Arbiter
shall use GAAP in the manner described in Section 2.6(a) above in
determining balances in the balance sheet, and shall not take into
account any changes in circumstance or events occurring after the close
of business on the Closing Date. The fees, costs and expenses of the
Arbiter (i) shall be borne by Buyer in the proportion that the aggregate
dollar amount of such disputed items so submitted that are
<page>
unsuccessfully disputed by Buyer (as finally determined by the Arbiter)
bears to the aggregate dollar amount of such items so submitted and
(ii) shall be borne by Sellers in the proportion that the aggregate
dollar amount of such disputed items so submitted that are successfully
disputed by Buyer (as finally determined by the Arbiter) bears to the
aggregate dollar amount of such items so submitted. Whether any dispute
is resolved by agreement among the parties or by the Arbiter, changes to
the Final Adjustments Report and the Closing Financial Statements shall
be made hereunder only for items as to which Buyer has taken exception
as provided herein. Buyer and Sellers each shall make available to the
other (upon the request of the other) their respective work papers
generated in connection with the preparation or review of the Final
Adjustments Report and the Closing Financial Statements. The payment
required after determination of all disputed amounts will be made by the
responsible party therefor to the other party by wire transfer of
immediately available funds within three business days after the final
determination is made.
Section 2.7 Earnout Payment As more specifically described below, the
Sellers may earn additional consideration ("Earnout") in the form of annual
earnout payments (each an "Earnout Payment") depending on the ability of the
Buyer and its subsidiaries, divisions and affiliates to achieve organic Gross
Profit Growth from the Unit, as defined below, during the five Earnout Years
(the "Earnout Period") following the Closing Date with respect to the gross
profits base set forth below.
A base Earnout of $12,500,000 will be allocated equally across the
five-year Earnout Period, i.e. $2,500,000 per year.
The Earnout Payment for each Earnout Year shall be equal to:
(Actual Gross Profit minus Gross Profit Base) X $2,500,000
Projected Gross Profit Growth
For purposes of this calculation, the following values for the
applicable Projected Gross Profit Growth and Gross Profit Base shall
be used:
Projected
Gross Profit Growth Gross Profit Base
2002 $5,360,000 $14,500,000
2003 $8,117,000 $15,000,000
2004 $10,585,000 $16,000,000
2005 $13,572,000 $17,000,000
2006 $17,658,000 $17,500,000
The maximum potential earnout is $4,000,000 per year (unless there
is an acceleration of remaining Earnout Payments due to a sale of all or
part of the Unit), and the total maximum potential earnout of
$20,000,000 for the five-year Earnout Period. Buyer shall pay Earnout
Payments to the Sellers within sixty (60) days of the end of each
Earnout Year according to the payment instructions provided by Sellers
unless such payments are accelerated as provided for herein. The
attached Exhibit D shows an example of an Earnout calculation.
For purposes of this Section, the following definitions apply:
(a) The term "Actual Gross Profit" shall mean, for the applicable
period, as determined in accordance with GAAP, the gross revenues
attributable to the sale, lease, license, sublicense or distribution
or other commercial use of products and services and related assets
that comprise the Unit, as defined below, less (1) sales commissions
payable to third parties, (2) unreimbursed freight and shipping
charges, (3) refunds for returns, and (4) the direct labor, direct
material costs and overhead costs in respect of such products and
services, provided that if the manufacturing for the Business is
relocated after the Closing Date to any facility other than those
used by Sellers prior to the Closing, direct labor expenses shall
not exceed the percent of direct labor and material costs set forth
on Schedule 2.7 for the purposes of the Earnout Payments. If a
product or service of the Unit is combined with another product or
service of Buyer or its affiliates, divisions or subsidiaries, then
gross revenue attributable to the products and services of the Unit
shall be equal to the total gross revenue attributable to the
combination product, multiplied by a fraction, the numerator of
which is the then current stand-alone price (without discounts and
not lower than reasonable market value) for such products and
services of the Unit, and the denominator of which is the aggregate
price of the combination products or services, where the non-Unit
products or services included in the combination products or
services are valued at current stand alone prices (without price
increases attributable to the proposed combination).
(b) The term "Earnout Year" means those twelve (12) month periods
commencing on January 1, 2002 and on subsequent anniversaries
thereof.
(c) The term "Unit" means the business unit(s) of CW Flight, CW
Corporation, and any of their subsidiaries, divisions and affiliates
that (i) utilize the Purchased Assets and all enhancements,
modifications, derivatives or developments thereto; and/or (ii)
provide products and services in connection with programs and
businesses listed on Schedule 2.7 (collectively, the "Unit").
From and after the Closing Date, Buyer agrees to (i) operate, or
cause to be operated, the Business in good faith and in the ordinary
course through December 31, 2006 to the end that the Buyer will not take
any action, and will refrain from taking any action that could
reasonably be expected to artificially lower or otherwise affect the
annual Earnout Payment, (ii) provide Sellers' Representative with a
segregated accounting of the Unit to enable Sellers to review the
Earnout calculation; (iii) report all items of revenue and expense
relating to the Unit in the periods in which they are incurred, (iv)
provide the Chairman of LDS or his designee with an income statement for
each Earnout Year within 90 days of such year end, (v) provide the
Chairman of LDS or his designee with a calculation of the annual Earnout
Payment within 90 days of the end of each Earnout Year, (vi) provide the
Chairman of LDS or his designee with a quarterly balance sheet and
income statement for the Unit, and (vii) provide the Chairman of LDS or
his designee with a certification by the Chief Financial Officer of the
Buyer that the items in the preceding clauses (iv), (v) and (vi) were
prepared in accordance with GAAP.
Buyer agrees to a minimum yearly aggregate budget for marketing,
general and administration and research and development for the Unit of
US$ 4,760,000 for the first Earnout Year and 6.8% of the prior year
actual annual sales revenues of the Unit for all subsequent Earnout
Years, excluding returned products (collectively, the "Resource
Allocation"). Buyer's compliance with this requirement shall be measured
in the aggregate, rather than by individual cost category, provided that
the allocation of spending within the aggregate Resource Allocation
shall reflect reasonable business judgments about how to increase the
value of the Unit. If the Resource Allocations are not devoted to the
Unit in any Earnout Year, Buyer shall pay the Seller the maximum
potential Earnout Payment of $4,000,000 for that Earnout Year. The sum
of this payment plus the Earnout Payment actually made for that Earnout
Year shall not exceed the maximum potential Earnout Payment, absent a
sale or transfer of assets from the Unit, of $4,000,000 per year.
If CW Corporation undergoes a Change in Control (as defined below)
prior to December 31, 2006, then the obligations relating to this
Earnout shall be assumed by the acquiring entity. In the event that such
acquiring entity fails to make any required Earnout Payments within ten
(10) business days of the date such Earnout Payments are due, the
Earnout for all subsequent Earnout Years (and portions thereof) shall
become immediately due and payable without further demand or notice, or,
for disputed Earnout Payments, after pursing to a final decision the
arbitration procedures provided for in Section 13.12. For the purposes
of this Section 2.7, "Change of Control" shall be defined as (i) the
consolidation of CW Corporation with or acquisition of CW Corporation by
another entity in a merger, stock purchase, or other reorganization in
which the holders of the outstanding voting stock of CW Corporation
immediately preceding the consummation of such event shall, immediately
following such event, hold, as a group, less than a majority of the
voting securities of the surviving or successor entity; or (ii) the sale
of all or substantially all of CW Corporation's assets.
If Buyer or its affiliates, subsidiaries or divisions sell or
otherwise transfer any of the assets, securities or any portion of the
business of the Unit (the "Transferred Assets") to a third party prior
to December 31, 2006, other than a sale of such assets in the ordinary
course of business or as a result of a Change of Control of CW
Corporation, then the present value (as calculated with a discount rate
equal to the annual treasury bill rate at the time of the sale or
transfer of Transferred Assets) of the maximum potential Earnout for all
subsequent Earnout Years (prorated for partial years) shall become
immediately due and payable with respect to the Transferred Assets, such
payment to be calculated as follows. The maximum potential Earnout for
all subsequent Earnout Years (prorated for partial years) shall be
multiplied by a fraction, the numerator of which shall be the Actual
Gross Profit attributable to the Transferred Assets between January 1,
2002 and the end of the most recent fiscal quarter preceding the
transfer, and the denominator of which shall be the Actual Gross Profit
of the Unit between January 1, 2002 and the end of the most recent
fiscal quarter preceding the transfer (the "Percentage"). The Earnout
shall continue to apply to the balance of the Unit with the yearly
maximum potential Earnout, the Projected Gross Profit Growth, and the
Gross Profit Base all reduced by the Percentage for purposes of
calculating subsequent Earnout Payments.
Buyer and its subsidiaries, divisions and affiliates will permit LDS
and its representatives to have access to all books and records and the
right to review all Buyer activities necessary to evaluate the Earnout
calculation, the Resource Allocation for each Earnout Year, the earnout
obligations relating to the SPA, and Buyer's purchasing activities
involving purchase of the assets specified in Schedule 2.3 (g) or
similar assets during the Earnout Period.
If LDS disputes the Buyer's determination of any Earnout
calculation, it shall notify Buyer in writing (a "Dispute Notice")
within thirty (30) days of its receipt of the Buyer's determination. In
the event of such a dispute, LDS and Buyer shall first use their best
efforts to resolve the dispute. If the dispute cannot be resolved within
ten (10) days, it shall be submitted, to an independent public
accounting firm on which the Parties mutually agree (the "Accountant")
for resolution. Within 30 days after submission of the dispute, the
Accountant shall determine the Earnout calculation in accordance with
this Agreement. The Accountant's determination shall be final and
binding upon the Parties, and the Buyer shall immediately pay to the
Seller any additional amount of Earnout due as a result of the
Accountant's determination. The fees and expenses of Accountant shall be
shared equally by LDS and Buyer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer that:
Section 3.1 Organization. LDS is a limited liability corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. LDS Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. Vista is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Sellers has all
requisite corporate power and authority to own, lease and operate the properties
of the Business, including the Purchased Assets, and to carry on the Business in
the places where such properties are now owned, leased or operated, and such
Business is now conducted. Each of the Sellers is duly qualified to do business
as a foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification except where failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect.
Section 3.2 Authorization; Enforceability. Sellers have all requisite
corporate power and authority to enter into each Acquisition Agreement to which
it is a party and to perform its obligations hereunder and thereunder. All acts
required to be taken by Sellers to authorize the execution and delivery of the
Acquisition Agreements to which they are a party, and the consummation of the
transactions contemplated herein and therein, have been taken, and no other
corporate proceedings on the part of Sellers are necessary to authorize such
execution, delivery and performance. This Agreement has been duly executed and
delivered by Sellers and constitutes a legal, valid and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms, except to the
extent such enforceability may be limited by applicable bankruptcy and other
laws affecting creditors' rights, or by general equitable principles. Each
Acquisition Agreement to which Sellers are a party will be, as of the Closing,
duly executed and delivered by Sellers and will constitute a legal, valid and
binding obligation of Sellers in accordance with its terms, except to the extent
such enforceability may be limited by applicable bankruptcy and other laws
affecting creditors' rights, or by general equitable principles. The execution
and performance of each Acquisition Agreement, and the compliance with the
provisions hereof and thereof by Sellers, will not conflict with, violate or
result in the breach of any of the terms, conditions or provisions of the
respective charter or by-laws of Sellers, as the case may be, or any judgment,
order, injunction, decree, law, regulation or ruling of any Governmental Body to
which Sellers, the Purchased Assets and/or the Business are subject, except
where the same would not impede Sellers' ability to perform its obligations
under the Acquisition Agreements or have a Material Adverse Effect. Except as
indicated on Schedule 3.2 hereto, the execution and performance of each
Acquisition Agreement, and the compliance with the provisions hereof and thereof
by Sellers, will not result in any breach of any of the terms or conditions of,
or constitute a default under, any license, indenture, mortgage, agreement or
other instrument to which any of Sellers is a party or by which it is bound,
except where such breach or default would not impede Sellers' ability to perform
their obligations under the Acquisition Agreements or have a Material Adverse
Effect.
Section 3.3 Capitalization. The authorized capital stock of LDS
Acquisition consists of 200,000 shares of common stock, $.01 par value, of which
10,000 shares are issued and outstanding. The authorized capital stock of Vista
consists of 1,000,000 shares of common stock, no par value of which 7,200 shares
are issued and outstanding. All of such issued and outstanding shares are
validly issued, fully paid and nonassessable and will be transferred to Buyer
free and clear of any liens or encumbrances. There are no outstanding or
authorized options, warrants or similar agreements to which any of the Sellers
are a party providing for the issuance or acquisition of any of the capital
stock of LDS Acquisition or Vista.
Section 3.4 Financial Statements. Exhibit A hereto contains the
unaudited Balance Sheet of the Business as of June 30, 2001 and the related
statement of income for the period then ended (collectively, the "Financial
Statements"). Such Financial Statements, except for the absence of footnotes (i)
are in accordance with the books and records of each of the Sellers, (ii) are
accurate in all material respects, (iii) fairly present, in all material
respects, the financial condition and the results of operations of the Business
as at and for the twelve month period ending December 31, 2000, for the six
month period ending June 30, 2001 and for the three month period ending March
31, 2001, and (iv) have been prepared in accordance with GAAP. To the Sellers'
Knowledge, the Sellers do not have any debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due, related to the Business, that is not reflected or reserved against
in the Financial Statements or set forth in the Exhibits and Schedules hereto,
except for those which are not required by GAAP to be included in a balance
sheet.
Section 3.5 Government Approvals. Except for the filing requirements
under the HSR Act and as set forth on Schedule 3.5 hereto, the Sellers are not
required to submit any notice, report or other filing with, or obtain any
consent, approval or waiver from, any Governmental Body in connection with its
execution, delivery or performance of the Acquisition Agreements, or the
consummation of the transactions contemplated herein or therein, except for
notice, consent and approval requirements associated with Contracts in which a
Government Body is a party, and except where the failure to make such submission
or obtain such consent, approval or waiver, would not have a Material Adverse
Effect and would not impede Sellers' ability to perform its obligations under
the Acquisition Agreements.
Section 3.6 Fixed Assets; Properties; Liens. Sellers own or lease,
subject only to the terms of the Contracts and the matters permitted by the
following sentence, all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) included in the Purchased Assets. All
properties and assets included in the Purchased Assets are free and clear of all
liens and encumbrances.
Section 3.7 Condition of Assets. Except as set forth in Schedule 3.7
hereto, to the Seller's knowledge, the buildings, plants, structures, and
equipment included in the Purchased Assets are structurally sound and are in
reasonable operating condition, ordinary wear and tear excepted, and the Sellers
are in material compliance with their maintenance obligations under their
respective real property leases.
Section 3.8 Taxes. Each of Sellers and their Affiliates have filed or
caused to be filed on a timely basis all Tax returns that are or were required
to be filed by them or with respect to it as a member of a group of
corporations. All of Sellers' and Affiliates' Taxes required to have been paid
on or prior to the date hereof have been paid in full. All Taxes that Sellers or
the Affiliates is or was required to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Body or other entity or Person. Except as set forth in Schedule 3.8
hereto, there are no assessments against Sellers with respect to Taxes that have
been issued and are outstanding. Except as set forth on Schedule 3.8, there is
no Tax deficiency outstanding or assessed or proposed against either Sellers
that is not reflected as a liability on the Balance Sheet nor have Sellers
executed any agreements or waivers extending any statute of limitations on or
extending the period for the assessment or collection of any Tax.
Section 3.9 Compensation. Sellers have previously delivered to Buyer a
schedule listing the date of hire and salary of each of the Employees. Other
than as set forth in Schedule 3.9 hereto, Sellers are not a party to any
employment agreement with respect to any of the Employees, or to any union
Contract.
Section 3.10 Employee Benefit Plans. Except as set forth on Schedule
3.10 hereto, Sellers do not have any pension or other employee benefit plans
which are subject to the provisions of Title IV of the Employee Retirement
Income Security Act of 1974, as amended, the application of which could give
rise to direct or contingent liabilities by Buyer to the Pension Benefit
Guaranty Corporation.
<page>
Section 3.11 Compliance With Legal Requirements. Except as set forth in
Schedule 3.11 hereto, to the best of Sellers' Knowledge, the Sellers have
conducted the Business in compliance with all applicable Legal Requirements,
except for such noncompliance as would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 3.12 Legal Proceedings; Orders. Except as set forth on Schedule
3.12 hereto, there are no Proceedings pending or, to the best of Sellers'
Knowledge, threatened, before any Governmental Body, against any of the Sellers
involving, affecting or relating to the Business, the Purchased Assets or the
transactions contemplated by this Agreement, except for those which would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Schedule 3.12, there is no judgment, order, injunction or decree of any
Governmental Body to which either of the Sellers , or any of the Purchased
Assets is subject.
Section 3.13 Absence of Certain Changes and Events. Except as set forth
in Schedule 3.13 hereto, since September 1, 2001, Sellers have conducted their
business only in the ordinary course of business and no event, circumstance or
condition has occurred that has caused a Material Adverse Effect.
Section 3.14 Intellectual Property Assets. Sellers do not own any
patents or patent applications. Except as set forth on Schedule 3.14, Sellers
own or are the authorized licensees of the software and documentation and
product specifications that are used in the Business (other than off-the-shelf
software, licenses pursuant to "shrink wrap" or click licenses, all of which are
used in the Business in the ordinary course), free and clear of all liens, and
all of the intellectual property assets owned by Sellers and used in the
Business ("Intellectual Property Assets") are included in the assets and
properties to be transferred hereunder. Sellers have not received written notice
of any claims, disputes, actions, proceedings, suits or appeals pending against
them with respect to any of the Intellectual Property and none has been overtly
threatened within the last twelve months, except such as would not, individually
or in the aggregate, have a Material Adverse Effect. To Sellers' Knowledge, the
use of the Intellectual Property Assets does not infringe the property rights of
any third party.
Section 3.15 Contracts. Schedule 3.15 hereto sets forth a list of all
material Contracts which involve remaining consideration in excess of $50,000,
the term of which has not expired or been terminated. Except where the same
would not have a Material Adverse Effect, each such Contract is legal, valid,
binding and enforceable against any Seller that is a party thereto in accordance
with its terms, except to the extent such enforceability may be limited by
applicable bankruptcy or other laws affecting creditors' rights, or by general
equity principles, and is in full force and effect on the date hereof. Sellers
have not received any written notice of default that has not been cured in
respect of, any such Contract. To Sellers' Knowledge, no party to any such
Contract is in default in respect thereof and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default, except
where such a default would not have a Material Adverse Effect. Sellers have made
available to Buyer true and complete copies of all of such Contracts. Except as
set forth on Schedule 3.15 hereto or where the failure to obtain such consent
would not have a Material Adverse Effect, and taking into account the provision
in Section 2.3(d) allowing for Sellers to hold any Contracts on behalf of Buyer
until consent to assign such Contracts to Buyer is obtained. Such Contracts
included in the Purchased Assets are assignable to Buyer without any required
consent of any other Person.
<page>
Section 3.16 Labor Relations; Compliance. Except as set forth in
Schedule 3.16 hereto, neither Sellers are a party to any collective bargaining
or other union Contract. There is not presently pending or existing and
threatened, any strike, slowdown, picketing or other work stoppage. Except as
set forth in Schedule 3.16 hereto, to the Sellers' Knowledge, Sellers have
complied with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, absence of sexual or other harassment,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing except for such noncompliance which, individually or in the aggregate,
would not have a Material Adverse Effect.
Section 3.17 Insurance. Schedule 3.17 is a true and complete list of all
insurance policies held by the Sellers. All such insurance policies are in full
force and effect.
Section 3.18 Real Property. Sellers do not own any real property used or
held for use in connection with the Business.
Section 3.19 Brokerage. Except for fees payable to Windsor Group, LLC,
Sellers have not incurred, directly or indirectly, any obligation or liability,
contingent or otherwise, for any brokerage fees, finder's fees, agent's
commissions or other like payment in connection with this Agreement, or the
transactions contemplated herein.
Section 3.20 Accounts Receivable. To Sellers' Knowledge, all accounts
receivable being transferred as assets of the Business are collectible in the
ordinary course of business and are not subject to any valid defenses to the
right to collect.
Section 3.21 Inventory. All amounts shown for inventory on the Balance
Sheet, as adjusted for the inventory set forth on Schedule 2.3 (g), have been
determined in accordance with GAAP consistently applied in all material
respects, including but not limited to adjustments for scrap, excess and/or
obsolete material and the Inventory has not been engineered out of current or
planned products as of the Closing Date.
Section 3.22 Gross Profit Margins. The Gross Profit Margins set forth on
Schedule 3.22, representing Contracts with unperformed balances of $500,000 or
more as of the Closing Date, are complete and accurate as of October 20, 2001
and have been determined in accordance with Sellers' historic practices and GAAP
as of the Closing Date.
Section 3.23 Rights to TASS and Qupid Programs. All of Lau's rights to
and in the TASS and Qupid programs have been assigned to Sellers.
Section 3.24 Price Adjustment. Provided that Sellers maintain control of
all negotiations under the contract between LDS and United Defense, L.P.
relating to the Bradley Program (a multiyear contract with purchase order number
BV0003144), Sellers represent that there will be no downward adjustment in the
contract price as a result of a United Defense, L.P. Audit under such contract
provided that LDS performs its obligations under such contract after the Closing
Date.
<page>
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that:
Section 4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Section 4.2 Authorization; Enforceability. Buyer has all requisite
corporate power and authority to enter into each Acquisition Agreement, and to
perform its obligations hereunder and thereunder. All acts required to be taken
by Buyer to authorize the execution and delivery of each Acquisition Agreement,
and the consummation of the transactions contemplated herein and therein, have
been taken, and no other corporate proceedings on the part of Buyer are
necessary to authorize such execution, delivery and performance. This Agreement
has been duly executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except to the extent such enforceability may be limited by applicable
bankruptcy and other laws affecting creditors' rights, or by general equitable
principles. Each Acquisition Agreement will be, as of the Closing, duly executed
and delivered by Buyer, and will constitute legal, valid and binding obligations
of Buyer in accordance with its terms, except to the extent such enforceability
may be limited by applicable bankruptcy and other laws affecting creditors'
rights, or by general equitable principles. The execution and performance of
each Acquisition Agreement, and the compliance with the provisions hereof and
thereof by Buyer, will not conflict with, violate or result in the breach of any
of the terms, conditions or provisions of the Certificate of Incorporation or
by-laws of Buyer, or any judgment, order, injunction, decree, law, regulation or
ruling of any Governmental Body to which Buyer is subject, except where the same
would not impede Buyer's ability to perform its obligations under the
Acquisition Agreements or have a material adverse effect on the condition,
results of operations, properties, assets or business of Buyer, taken as a
whole. The execution and performance of each Acquisition Agreement, and the
compliance with the provisions hereof and thereof by Buyer, will not result in
any breach of any of the terms or conditions of, or constitute a default under,
any license, indenture, mortgage, agreement or other instrument to which Buyer
is a party or by which it is bound, except where such breach or default would
not impede Buyer's ability to perform its obligations under the Acquisition
Agreements or have a material adverse effect on the condition, results of
operations, properties, assets or business of Buyer, taken as a whole.
Section 4.3 Government Approvals. Except for the filing requirements
under the HSR Act and as set forth in Schedule 4.3 hereto, Buyer is not required
to submit any notice, report or other filing with, or obtain any consent,
approval or waiver from, any Governmental Body in connection with its execution,
delivery or performance of the Acquisition Agreements, or the consummation of
the transactions contemplated herein or therein, except where the failure to
make such submission or obtain such consent, approval or waiver, would not have
a material adverse effect on the condition, results of operations, properties,
assets or business of Buyer, taken as a whole and would not impede Buyer's
ability to perform its obligations under the Acquisition Agreements.
<page>
Section 4.4 Brokerage. Except with respect to its arrangement with
Philpott, Ball & Werner, Buyer has not incurred, directly or indirectly, any
obligation or liability, contingent or otherwise, for any brokerage fees,
finder's fees, agent's commissions or other like payment in connection with this
Agreement, or the transactions contemplated herein.
Section 4.5 Investment. The Buyer is not acquiring the Stock with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933 , as amended.
ARTICLE V.
COVENANTS OF SELLERS
Section 5.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, Sellers will (a) afford Buyer and its Representatives,
access to each of the Sellers' personnel, properties, Contracts, books and
records, on reasonable notice and during regular business hours, and (b) furnish
Buyer with such additional financial, operating, and other data and information
in the Sellers' possession as Buyer may reasonably request.
Section 5.2 Conduct of Business. Prior to the Closing Date, Sellers will
(a) conduct the Business only in the ordinary course of business; and (b) use
their reasonable efforts to preserve intact their current business organization,
retain the services of their present officers, employees, agents and sales
representatives, and preserve the relations and goodwill with their suppliers,
customers, landlords, creditors, Employees, agents and others having business
relations with the Sellers.
Section 5.3 Required Approvals. As promptly as practicable after the
date of this Agreement, Sellers will, and Sellers will cause their applicable
Affiliates to, make all filings required by Legal Requirements to be made by
them in order to consummate the contemplated transactions (including all filings
under the HSR Act). Between the date of this Agreement and the Closing Date,
Sellers will, and Sellers will cause their applicable Affiliates to, (a)
cooperate with Buyer with respect to all filings that Buyer is required by Legal
Requirements to make in connection with the transactions contemplated hereby,
and (b) cooperate with Buyer in obtaining all consents identified in Schedule
4.3 hereto.
Section 5.4 No Negotiation. Until such time, if any, as this Agreement
is terminated pursuant to Article XI, Sellers and their Affiliates will not, nor
will Sellers permit any entity that they control or any of their respective
Representatives to, directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or proposals
from, any Person (other than Buyer) relating to any transaction involving the
sale of the Business or assets (other than in the ordinary course of business)
of Sellers or any of the securities of the Sellers, or any merger,
consolidation, business combination, or similar transaction involving Sellers.
Section 5.5 Additional Information. Sellers shall promptly furnish to
Buyer all such financial and operating reports with respect to the Business as
may be prepared by them from time to time between the date hereof and the
Closing Date as Buyer may reasonably request. Sellers shall make available to
Buyer information with respect to any document, event, transaction or condition
entered into or occurring after the date hereof which, had it occurred or been
in effect on or prior to the date hereof, would have been included on the
Schedules to this Agreement, and any such information which would have been
included on a Schedule shall be deemed to amend the relevant Schedule when so
provided.
<page>
Section 5.6 Reasonable Efforts. Sellers will use their reasonable
efforts to effectuate the transactions hereby contemplated and to fulfill the
conditions to Buyer's obligations under Article VII of this Agreement.
Section 5.7 Non Solicitation; Non-Interference. At no time after the
date hereof until the fifth anniversary of the Closing Date shall the Sellers,
Lau or their Affiliates and/or any entity it controls:
directly or indirectly, in any capacity or in association with any
other person, solicit, induce, or in any manner attempt to solicit or
induce, any Employees to terminate his or her employment or to become
their employees, or
directly or indirectly, interfere with Buyer's relationship with,
cause the cancellation, discontinuation, termination or alteration (in a
manner detrimental to Buyer) of Buyer's relationship with any party who
is a customer, supplier, or manufacturer with respect to the Business.
ARTICLE VI.
COVENANTS OF BUYER
Section 6.1 Required Approvals. As promptly as practicable after the
date of this Agreement, Buyer will, and will cause each of its applicable
Affiliates to, make all filings required by Legal Requirements to be made by
them in order to consummate the contemplated transactions (including all filings
under the HSR Act). Between the date of this Agreement and the Closing Date,
Buyer will, and will cause each of its applicable Affiliates to,
(a) cooperate with Sellers and the Affiliates with respect to all
filings that either Sellers and the Affiliates is required by Legal Requirements
to make in connection with the transactions contemplated hereby, and
(b) cooperate with Sellers and the Affiliates in obtaining all consents
identified in Schedule 3.5 hereto.
Section 6.2 Employees and Employee Benefits.
(a) Hiring. At the Closing Date, Buyer will offer to employ on an
at-will basis (except where otherwise contemplated by this Agreement)
each of Sellers' Employees listed on Schedule 1.18, on substantially the
same terms and conditions, including position, rates of pay, service and
credit, subject to changes as may be made by Buyer in the ordinary
course of business after the Closing Date. The individuals who accept
Buyer's offer hereunder are hereinafter referred to as the "Assumed
Employees." Buyer shall not take any action with respect to Employees
who become employees of Buyer or its Affiliates on the Closing Date
<page>
which could create Worker Adjustment and Retraining Notification Act
liabilities for, or in any Affiliates thereof, Sellers or its
Affiliates.
(b) Welfare Benefits. Commencing as of 12:01 a.m. on the Closing
Date, Buyer shall provide the Assumed Employees and their dependents and
beneficiaries (collectively with such Assumed Employees, the "Eligible
Individuals") Employee Welfare Benefit Plan (including severance plans)
coverages (i) in each case as provided by Buyer's comparable Employee
Benefit Plan, (ii) without application or reapplication of any
elimination or waiting period, eligibility period (other than such
periods as may be generally applicable to Buyer's employees, and subject
to (iii) following), or exclusion of pre-existing condition, and (iii)
crediting each Assumed Employee's service with Seller through the
Closing Date as though such service had been performed with Buyer for
purposes of participation in Buyer's Employee Benefit Plans including,
without limitation, vacation, vacation pay, severance benefits, service
awards, Buyer's 401(k) Plan, and health plans, except as otherwise
agreed to by Sellers and Buyer. The parties acknowledge that the Buyer
is not assuming any of the Seller's Employee Benefit Plans. Upon the
Closing Date, the Buyer shall assume the obligation to make COBRA
coverage available to the Eligible Individuals under its group health
plan.
(c) 401(k) Plan. The parties acknowledge that Buyer is not assuming
the 401(k) plan covering Seller's employees ("Sellers' 401(k) Plan").
Each Assumed Employee instead shall be eligible to participate in the
401(k) plan administered by the Buyer for employees of Buyer ("Buyer's
401(k) Plan") commencing as of the Closing Date pursuant to the terms of
the Buyer's 401(k) Plan. Service of the Assumed Employees with Seller
through the Closing Date shall be taken into account for purposes of
participation in Buyer's 401(k) Plan. If an Assumed Employee desires to
rollover his or her account balance at the time of distribution from the
Seller's 401(k) Plan, Buyer and Seller shall reasonably cooperate to
facilitate the rollover of each electing Assumed Employee's account
balance from Seller's 401(k) Plan to Buyer's 401(k) Plan.
(d) Employment Tax Filings. Buyer and Seller agree that, with
respect to each Assumed Employee, each of Buyer and Seller will follow
the alternative procedures for employment tax filings that are set out
in Section 5 of IRS Rev. Proc. 96-60 and that Buyer shall include on
Forms W-2 filed for each Assumed Employee (i) the entire amount of each
Assumed Employee's wages and other compensation for the 2001 calendar
year and (ii) the entire amount of Tax withheld and paid during the 2001
calendar year in connection with amounts paid or owing to each Assumed
Employee.
Section 6.3 Reasonable Efforts. Buyer will use its reasonable efforts to
effectuate the transactions hereby contemplated and to fulfill the conditions to
Sellers' obligations under Article VIII of this Agreement.
<page>
ARTICLE VII.
CONDITIONS TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement are subject to the
fulfillment, at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part at or prior to the Closing by Buyer:
Section 7.1 Accuracy of Representations and Warranties. All the
representations and warranties of Sellers contained in this Agreement shall be
accurate in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time, except for such
changes therein as are contemplated by this Agreement.
Section 7.2 Sellers' Performance. Sellers shall have performed and
complied in all material respects with all agreements and conditions on its part
required by this Agreement to be performed or complied with prior to or at the
Closing Date.
Section 7.3 Officer's Certificate. Buyer shall have received a
certificate of an officer of Sellers, dated the Closing Date, certifying on
behalf of Sellers as to the fulfillment of the conditions specified in
Sections 7.1 and 7.2 hereof.
Section 7.4 Governmental Consents. Sellers shall have made all filings
and petitions required to be made by them prior to the Closing Date (and all
applicable waiting periods shall have expired), and Buyer shall have received
all consents, approvals, authorizations and permits required to be obtained
prior to the Closing Date from all governmental and regulatory authorities in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions hereby contemplated, as set forth on
Schedule 3.5.
Section 7.5 HSR. Sellers shall have made all pre-merger notification
filings required to be made by them under the HSR Act, and all applicable
waiting periods thereunder shall have expired or been terminated without any
request from any appropriate governmental agency for additional information or,
if additional information has been requested, all applicable extended waiting
periods shall have expired and no party to this Agreement shall have received
notice from the Federal Trade Commission or the Department of Justice that the
transactions contemplated by this Agreement violate the Federal Trade Commission
Act or the Clayton Act.
Section 7.6 No Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of Buyer's obligations hereunder, nor shall there be
pending any suit, action or proceeding requesting such relief or remedy.
Section 7.7 Consents. There shall have been obtained the consent, in
form and substance reasonably satisfactory to counsel for Buyer, of each other
party to those Contracts specified as requiring such consent on Schedule 3.15
hereto, the failure to obtain which consents, individually or in the aggregate,
would have a Material Adverse Effect.
<page>
Section 7.8 Conveyances. Buyer shall have received all conveyances,
deeds, assignments, bills of sale, confirmations, and further instruments as
shall be necessary in order to complete the conveyances, transfers, assignments
and deliveries provided for herein and to convey to Buyer the Purchased Assets.
Section 7.9 Lease Agreement. Sellers or their Affiliates, as the case
may be, shall have transferred their subleases relating to the Leases to Buyer.
Section 7.10 Employment Agreements. Buyer shall have entered into
mutually satisfactory employment agreements with Messrs. Andrew Davis, Phil
Hamilton, Henry Squillante, Darwin Beckel, Dennis Lussier, Paul Malchodi,
Richard Copra, Lance Martin, David Dietz, Gorky Chin and Ron Rambin and Ms.
Pushpa Dixit.
Section 7.11 Adequate Customer Assurances. Buyer shall have received
adequate assurances from the customers of the Sellers that Buyer's acquisition
of Sellers' assets will have no material effect on the customers' future plans
to conduct business with the Buyer as the operator of the Business.
Section 7.12 Schedules and Exhibits. Sellers and Buyer shall have agreed
to the form and content of all Schedules and Exhibits to this Agreement.
Section 7.13 Transition Services Agreement. Sellers or Lau, as the case
may be, shall have executed and delivered the Transition Services Agreement.
ARTICLE VIII.
CONDITIONS TO SELLERS' OBLIGATIONS
All obligations of Sellers under this Agreement are subject to the
fulfillment, at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part at or prior to the Closing by Sellers:
Section 8.1 Accuracy of Representations and Warranties. All the
representations and warranties of Buyer contained in this Agreement shall be
accurate in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time, except for such
changes therein as are contemplated by this Agreement.
Section 8.2 Buyer's Performance. Buyer shall have performed and complied
in all material respects with all agreements and conditions on its part required
by this Agreement to be performed or complied with prior to or at the Closing
Date.
Section 8.3 Officer's Certificate. Sellers shall have received a
certificate of an officer of Buyer, dated the Closing Date, certifying on behalf
of Buyer as to the fulfillment of the conditions specified in Sections 8.1 and
8.2 hereof.
Section 8.4 Governmental Consents. Buyer shall have made all filings and
petitions required to be made by it prior to the Closing Date (and all
applicable waiting periods shall have expired), and Sellers shall have received
all consents, approvals, authorizations and permits required to be obtained
<page>
prior to the Closing Date from all governmental and regulatory authorities in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions hereby contemplated, set forth on Schedule
4.3.
Section 8.5 HSR. Buyer shall have made all pre-merger notification
filings required to be made by it under the HSR Act, and all applicable waiting
periods thereunder shall have expired or been terminated without any request
from any appropriate governmental agency for additional information or, if
additional information has been requested, all applicable extended waiting
periods shall have expired and no party to shall have received notice from the
Federal Trade Commission or the Department of Justice that the transactions
contemplated by this Agreement violate the Federal Trade Commission Act or the
Clayton Act.
Section 8.6 No Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of Sellers' obligations hereunder, nor shall there be
pending any suit, action or proceeding requesting such relief or remedy.
Section 8.7 Purchase Price. Sellers shall have received the Cash
Purchase Price payable to it from Buyer pursuant to Section 2.4 hereof, by wire
transfer of immediately available funds to a bank account designated by it.
Section 8.8 Assumption Agreement. Buyer shall have executed and
delivered to Sellers the Assumption Agreement.
Section 8.9 Lease Agreements. Buyer shall have entered into sub-leases
for the Leases and assumed the obligations thereunder.
Section 8.10 Employment Agreements. Buyer shall have entered into
mutually satisfactory employment agreements with the individuals named in
Section 7.10.
Section 8.11 Schedules and Exhibits. Sellers and Buyer shall have agreed
to the form and content of all Schedules and Exhibits to this Agreement.
Section 8.12 Transition Services Agreement. Buyer shall have executed
and delivered the Transition Services Agreement.
ARTICLE IX.
POST-CLOSING COVENANTS
Section 9.1 Further Assurances. From and after the Closing Date, each
party to this Agreement shall (or shall cause its applicable Affiliate to), at
any time and from time to time, at the requesting party's cost and expense,
make, execute and deliver, or cause to be made, executed and delivered, such
assignments, assumptions, deeds, bills of sale, filings and other instruments,
consents and assurances and take or cause to be taken all such action as the
other party may reasonably request to carry out the terms of this Agreement. In
addition, each party agrees to, and will cause its and its Affiliates'
Representatives to, cooperate fully with the other party in connection with any
Proceeding which relates to the operation or activities of the Business prior to
the Closing Date.
<page>
Section 9.2 Retention of Records. After the Closing, Sellers and their
Affiliates and Representatives shall, upon reasonable notice to Buyer, have
access during usual business hours to the books and records of the Business for
all periods prior to the Closing Date for all reasonable business and tax
purposes and may make copies or extracts from such books and records for all
reasonable business and tax purposes. Buyer agrees to retain the books and
records of the Business prior to the Closing Date for at least ten years after
the Closing Date except where longer records retention is required by applicable
law (including Internal Revenue Service requirements).
Section 9.3 Litigation Support. In the event and for so long as any
party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, compliant, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Sellers, each of the other parties will cooperate
with the contesting or defending party and his or its counsel in the contest or
defense, make available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all (solely with respect to third party costs) at the sole cost and
expense of the contesting or defending party (unless the contesting or defending
Party is entitled to indemnification therefor under Article XII below).
Section 9.4 Payment of Liabilities. The Buyer shall pay, perform or
otherwise discharge when due all liabilities and obligations assumed by it
pursuant to the terms of this Agreement.
Section 9.5 No Section 338 Election. The Buyer agrees not to file by
election under Section 338 of the Code with respect to the transactions
contemplated hereby.
ARTICLE X.
NONCOMPETITION
Section 10.1 Noncompetition. Sellers, Lau and their Affiliates covenant
and agree, that, for a period of five (5) years from the Closing Date, they will
not, anywhere in the world, directly or indirectly engage in or own, operate,
advise or manage any Person engaged in the Business.
Section 10.2 Breach. In the event of a breach, or threatened breach of
the provisions of this Article X, in addition to any other remedies Buyer may
have at law or in equity, Buyer shall be entitled to seek an injunction or
similar remedy so as to enable it specifically to enforce such provisions.
Section 10.3 Severability. It is the desire and intent of the parties
hereto that the provisions of this Article X be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular portion of this
<page>
Article X should be adjudicated to be invalid or unenforceable, such portion
shall be deleted and such deletion shall apply only with respect to the
operation of this Article X in the particular jurisdiction in which such
adjudication is made. To the extent any provision hereof is deemed unenforceable
by virtue of its scope in terms of area or length of time, but may be
enforceable with limitations thereon, the parties agree that the same shall,
nevertheless, be enforceable to the fullest extent permissible under the laws
and public policies applied in such jurisdiction in which enforcement is sought.
ARTICLE XI.
TERMINATION AND ABANDONMENT
Section 11.1 Termination. This Agreement may be terminated at any time
prior to or on the Closing Date:
(a) by mutual consent of Buyer and Sellers;
(b) by either Buyer or Sellers, if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations) on or before December
31, 2001 or such later date as Buyer and Sellers may agree upon;
(c) by Buyer, if there has been a material violation or breach by
Sellers or of any agreement, representation or warranty contained in
this Agreement, or if the satisfaction of any condition to the
obligations of Buyer or its Affiliates hereunder becomes impossible, and
such violation, breach or condition has not been waived by Buyer; or
(d) by Sellers, if there has been a material violation or breach by
Buyer of any agreement, representation or warranty contained in this
Agreement, or if the satisfaction of any condition to the obligations of
Sellers hereunder becomes impossible, and such violation, breach or
condition has not been waived by Sellers. Section 11.2 No Waiver. No
termination pursuant to Section 11.1 hereof shall be deemed to
constitute a release or waiver by any party to this Agreement of any
claim against another party hereto based on any breach by such party of
its agreements, representations and warranties contained herein.
ARTICLE XII.
INDEMNIFICATION
Section 12.1 Indemnity by Sellers and Lau. Sellers and Lau agree to
indemnify and hold harmless Buyer and its Affiliates, employees, agents and
representatives from and against, and to reimburse Buyer and its Affiliates,
employees, agents and representatives in accordance with this Article XII with
respect to, any and all loss, damage, liability, claims, cost and expense (but
excluding lost profits and speculative damages), including reasonable
attorneys', accountants' and experts' fees, incurred by Buyer or its Affiliates
by reason of or arising out of or in connection with:
<Page>
(i) the material breach of any representation or warranty
contained in Article III hereof;
(ii) the material failure of Sellers to perform any obligation
required by this Agreement to be performed by it; or
(iii) any liability or obligation of Sellers that is not an
Assumed Liability.
Buyer agrees to give prompt notice to Sellers of the allegation by any
third party of the existence of any liability, obligation, contract, other
commitment or state of facts referred to in this Section 12.1, except that a
failure to provide such prompt notice shall not be a defense against a claim for
indemnity unless Sellers can demonstrate that they were materially prejudiced by
the failure to provide such notice. Sellers shall be entitled to control the
contest, defense, settlement or compromise of any such claim (including
engagement of counsel in connection therewith), at its own cost and expense,
including the cost and expense of attorneys', accountants' and experts' fees in
connection with such contest, defense, settlement or compromise; provided that
Sellers provide Buyer with written notice of its election to control such
contest, defense, settlement or compromise within ten days of Buyer's delivery
of notice to Sellers of such allegation, and Buyer shall have the right to
participate in the contest, defense, settlement or compromise of any such claim
at its own cost and expense, including the cost and expense of attorneys',
accountants' and experts' fees in connection with such participation; provided,
however, that, Sellers shall not settle or compromise any such claim without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld.
Section 12.2 Indemnity by Buyer. Buyer agrees to indemnify and hold
harmless Sellers, Lau and their Affiliates from and against, and to reimburse
Sellers, Lau, and their Affiliates in accordance with this Article XII with
respect to, any and all loss, damage, liability, claims, cost and expense (but
excluding lost profits and speculative damages), including reasonable
attorneys', accountants' and experts' fees, incurred by Sellers or their
respective Affiliates or Lau by reason of or arising out of or in connection
with:
(i) the material breach of any representation or warranty
contained in Article IV hereof;
(ii) the material failure of Buyer to perform any obligation
required by this Agreement to be performed by it;
(iii) any claims arising out of Buyer's obligations under the
SPA with respect to Buyer's obligations under the third year of the
earnout provided for in the SPA;
(iv) the Assumed Liabilities; or
(v) any liability, obligation or expense arising out of or in
connection with any action, suit, claim, charge, complaint,
proceeding or investigation to the extent arising out of or in
<page>
connection with the operations of the Business on or after the
Closing Date, including, without limitation, any claims for
severance of Employees terminated by Buyer or its Affiliates and any
liability under or associated with the Worker Adjustment and
Retraining Notification Act which may be assessed against or imputed
to Sellers or the Affiliates.
Sellers agree to give prompt notice to Buyer of the allegation by any
third party of the existence of any liability, obligation, contract, other
commitment or state of facts referred to in this Section 12.2, except that a
failure to provide such prompt notice shall not be a defense against a claim for
indemnity unless Sellers can demonstrate that they were materially prejudiced by
the failure to provide such notice. Buyer shall be entitled to control the
contest, defense, settlement or compromise of any such claim (including the
engagement of counsel in connection therewith), at its own cost and expense,
including the cost and expense of attorneys', accountants' and experts' fees in
connection with such contest, defense, settlement or compromise; provided that
Buyer provides Sellers with written notice of its election to control such
contest, defense, settlement or compromise within ten days of Sellers' delivery
of notice to Buyer of such allegation, and Sellers shall have the right to
participate in the contest, defense, settlement or compromise of any such claim
at its own cost and expense, including the cost and expense of attorneys',
accountants' and experts' fees in connection with such participation; provided,
however, that, Buyer shall not settle or compromise any such claim without the
prior written consent of Sellers, which consent shall not be unreasonably
withheld.
Section 12.3 Threshold and Ceiling. The indemnification obligation of
either party pursuant to Sections 12.1(i) and 12.2(i) above shall not take
effect until the cumulative amount of damages for which such indemnification is
claimed exceeds in the aggregate the amount of Four Hundred Ten Thousand Dollars
($410,000). Once this threshold is exceeded, the party seeking to enforce the
indemnity may recover all damages, without regard to the Threshold. The
aggregate amount of aggregate payments by the Sellers and Lau in satisfaction of
claims for indemnification under Section 12.1(i) shall not exceed $20,500,000.
Once the Escrow funds are exhausted, the Buyer may withhold any amounts for
which Sellers are liable under this indemnity from the Earnout, subject to the
terms and conditions of this Agreement. The aggregate amount of all payments by
the Buyer in satisfaction of claims for indemnification under Section 12.2(i)
shall not exceed $20,500,000.
Section 12.4 Tax Benefits and Insurance Coverage. The amount of any
indemnifiable loss shall be reduced to take account of any benefits in the form
of tax deductions to the party incurring the loss or to account for any
insurance recovery.
Section 12.5 Exclusive Remedy. The indemnification provided in Article
XII shall be the sole and exclusive remedy for (i) any inaccuracy or breach of
any representation or warranty made by any party in this Agreement or (ii) any
violation of any statute, regulation or common law; except that this Section
12.5 shall not limit any party's remedy for fraud.
ARTICLE 13
MISCELLANEOUS
Section 13.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement agrees to pay, without right of
<page>
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith.
Section 13.2 Public Announcements. Buyer and Sellers shall consult with
one another before issuing any press release or public announcement about the
transactions contemplated by this Agreement and except as may be required by
applicable Legal Requirements, no party shall issue any such press release or
other public announcement without the prior written consent of the other party.
Section 13.3 Confidentiality. The Confidentiality and Non-Disclosure
Agreement dated August 13, 2001, between Buyer and Lau Defense Systems will
remain in full force and effect until the Closing shall have occurred, and all
information received by Buyer, its Affiliates or Representatives relating to the
Business, whether orally or in writing, shall be subject thereto.
Section 13.4 Notices. All notices, consents, waivers, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time (a) personally delivered, (b) deposited, prepaid in a
nationally established overnight delivery firm such as Federal Express,
(c) mailed by certified mail, return receipt requested, or (d) transmitted by
facsimile (which shall be confirmed by a writing sent by certified mail on the
same business day as such facsimile is sent), as follows:
As to Buyer:
Curtiss-Wright Corporation
1200 Wall Street West
Lyndhurst, New Jersey 07071
Attn: General Counsel
and
Curtiss-Wright Flight Systems, Inc.
3120 Northwest Boulevard
Gastonia, NC 28052-1167
Attn: President
As to Sellers: Lau Defense Systems, LLC
30 Porter Road
Littleton, MA 01460
Attn: Chairman
copy to: Hill & Barlow, a Professional Corporation
One International Place
Boston, MA 02110
Attn: Charles J. Johnson
or to any other address which such party may have subsequently communicated to
the other party by a notice given in accordance with the provisions of this
Section.
Section 13.5 Survival. All statements, certifications, indemnifications,
representations and warranties made hereby by the parties to this Agreement, and
their respective covenants, agreements and obligations to be performed pursuant
to the terms hereof, shall survive the Closing Date and terminate eighteen
months after the Closing Date, except to the extent a party gives written notice
to the other party of any breach thereof on or before such date, and except for
the ongoing obligations provided for in Sections 2.2(a)(x), 2.3(g), 2.3(h),
2.4(b), 2.4(c), 2.7, 5.7, 6.2, 6.3, Article IX, Article X, Article XII, and
Article XIII, which shall survive the Closing (even if the damaged party knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitation) and ongoing obligations under the
Assumption Agreement and the Transition Services Agreement.
Section 13.6 Entire Agreement. This Agreement, the Exhibits and
Schedules attached hereto, the Confidentiality and Non-Disclosure Agreement
dated August 13, 2001 between Buyer and Lau Defense Systems and the other
Acquisition Agreements contain every obligation and understanding between the
parties relating to the subject matter hereof and merge all prior discussions,
negotiations and agreement, if any, between them, and none of the parties shall
be bound by any representations, warranties, covenants or other understandings,
other than as expressly provided herein or therein.
Section 13.7 Waiver and Amendment. Any representation, warranty,
covenant, term or condition of this Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the party
hereto entitled to the benefit thereof, and any term, condition or covenant
hereto may be amended by the parties hereto at any time. Any such waiver,
extension or amendment shall be evidenced by an instrument in writing executed
on behalf of the appropriate party by a Person who has been authorized by such
party to execute waivers, extensions or amendments on its behalf. No waiver by
any party hereto, whether express or implied, of its rights under any provision
of this Agreement shall constitute a waiver of such party's rights under such
provisions at any other time or a waiver of such party's rights under any other
provision of this Agreement. No failure by any party hereto to take any action
against any breach of this Agreement or default by another party shall
constitute a waiver of the former party's right to enforce any provision of this
Agreement or to take action against such breach or default or any subsequent
breach or default by such other party.
Section 13.8 No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
Person other than the parties hereto and their respective Affiliates, successors
and permitted assigns, any rights or remedies under or by reason of this
Agreement.
Section 13.9 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written.
Section 13.10 Headings and Interpretation. Titles and headings to
articles and sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. The Schedules and Exhibits referred to herein shall be construed
with and as an integral part of this Agreement to the same extent as if they
were set forth verbatim herein. Any disclosure made on any individual schedule
to this Agreement shall be deemed to be made for purposes of all schedules to
this Agreement to which such disclosure is applicable.
Section 13.11 Governing Law. This Agreement shall be interpreted and
construed in accordance with the laws of the Commonwealth of Massachusetts
without giving effect to the principles of conflicts of laws thereof.
Section 13.12 Dispute Resolution. In the event of a dispute relating to
this Agreement, the Parties shall make a good faith effort to settle any
differences without resorting to arbitration. If settlement of the dispute is
not possible, any and all disputes shall be resolved by arbitration. However,
the Party wishing to initiate arbitration shall give 30 days prior written
notice to the other Parties. During this 30-day period, selected senior
management of the Parties shall further attempt to resolve the dispute. Any
unresolved dispute arising out of or related to this Agreement, including its
interpretation, validity, scope and enforceability, shall be resolved by
arbitration to be held exclusively in Boston, Massachusetts and such arbitration
shall be the Parties' exclusive remedy.
Arbitration shall be conducted in accordance with the then existing
Commercial Dispute Resolution Procedures of the American Arbitration
Association. The arbitration shall be conducted by a one arbitrator to be named
by the Parties. Should the Parties fail to agree as to the naming of such
arbitrator, the arbitrator shall be determined in accordance with the applicable
rules of the American Arbitration Association.
The arbitrator shall decide each issue presented in writing. The
decision of the arbitrator shall be final and binding. The arbitrator shall
divide all costs in conducting the arbitration in the final award in accordance
with what is just and equitable under the circumstances. Except as otherwise
herein provided, each Party shall bear the burden of its own counsel fees
incurred in connection with the arbitration proceedings under this Agreement.
All information relating to or disclosed by any Party in connection with
the arbitration of any dispute relating to this Agreement shall be treated by
the Parties, the representatives of the Parties and the arbitrator as
confidential business information and no disclosure of such information shall be
made by either Party or the arbitrator without the prior written consent of the
Party furnishing such information in connection with the arbitration proceeding.
Judgment upon award rendered by the arbitrator may be entered in any
court having jurisdiction over the Parties or their assets; or application may
be made to such court for judicial acceptance of the award and an order of
enforcement, as the case may be. None of the Parties to this Agreement shall be
liable for any incidental, consequential or punitive damages arising out of or
related any breach of this Agreement.
Section 13.13 Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, provided that this Agreement may not be assigned by either party to any
Person without the prior written consent of the other party. Notwithstanding the
foregoing, Buyer may assign any of its rights under this Agreement, in whole or
in part, to one or more wholly owned subsidiaries of Buyer. Any party so
assigning this Agreement shall remain fully liable to the other party for the
performance by any designee or assignee of any obligation of such party
delegated to such designee or assignee.
Section 13.14 Taxes. Any taxes in the nature of sales or transfer taxes,
documentary stamps or similar taxes payable on the sale or transfer of all or
any portion of the assets, properties, business or equity interests being
transferred hereunder or the consummation of any other transaction contemplated
hereby, shall be paid by Buyer.
Section 13.15 Bulk Transfer Laws. Buyer hereby waives compliance by
Sellers with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the transactions contemplated by this Agreement.
Section 13.16 Attorneys Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
Section 13.17 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute a single agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Asset Purchase Agreement the day and year first above written.
CURTISS-WRIGHT CORPORATION
By: ______________________
Name:
Title:
CURTISS-WRIGHT FLIGHT SYSTEMS, INC.
By: ______________________
Name:
Title:
LAU DEFENSE SYSTEMS LLC
By: ______________________
Name:
Title:
LDS ACQUISITION CORP.
By: ______________________
Name:
Title:
VISTA CONTROLS INC.
By: ______________________
Name:
Title:
LAU ACQUISITION CORP. D/B/A LAU TECHNOLOGIES
By: ______________________
Name
Title:
EXHIBIT D
EARNOUT BASED ON ORGANIC GROWTH ONLY
($ in 000's) 2002 2003 2004
<c> <c> <c>
Gross Profit - Base $ 14,500 $ 15,000 $ 16,000
Gross Profit - Projected $ 19,860 $ 23,117 $ 26,585
-------- -------- --------
Projected Gross Profit Growth $ 5,360 $ 8,177 $ 10,585
-------- -------- --------
Earnout (Prorated up to 1.6 times) $ 2,500 $ 2,500 $ 2,500
Maximum Potential Annual Earnout $ 4,000 $ 4,000 $ 4,000
-------- -------- --------
2005 2006
Gross Profit - Base $ 17,000 $ 17,500
Gross Profit - Projected $ 30,572 $ 35,158
-------- --------
Projected Gross Profit Growth $ 13,572 $ 17,658
-------- --------
Earnout (Prorated up to 1.6 times) $ 2,500 $ 2,500
Maximum Potential Annual Earnout $ 4,000 $ 4,000
-------- --------
Example 2002 2003 2004
Gross Profit - Actual $ 22,360 $ 30,117 $ 24,585
Less: Gross Profit - Base (14,500) (15,000) (16,000)
-------- -------- --------
Actual Gross Profit Growth $ 7,860 $ 15,117 $ 8,585
-------- -------- --------
Ratio of Act. GP Growth to Proj. GP Growth 1.47 1.86 0.81
-------- -------- --------
Earnout Payments $ 3,666 $ 4,000 $ 2,028
-------- -------- --------
2005 2006
Gross Profit - Actual $ 42,572 $ 43,158
Less: Gross Profit - Base (17,000) (17,500)
-------- --------
Actual Gross Profit Growth $ 25,572 $ 25,658
-------- --------
Ratio of Act. GP Growth to Proj. GP Growth 1.88 1.45
-------- --------
Earnout Payments $ 4,000 $ 3,633
-------- --------
</table>